Millions to lose out as state pension age increases

The government has recently announced that the state pension age will be increasing to 68 seven years earlier than planned. For people born after 1978, their state pension was always going to have to wait until this age, but for around seven million people who were born between 1970 and 1978, this deadline shift has brought some unwelcome news to their doors.

What’s happening, and why?

The state pension age had been planned to rise to 68 in 2044, but with this latest announcement, the government has proposed to bring this move forwards to 2037, catching millions of people in their 30’s and 40’s with a later retirement date. There are around six to seven million people who will be affected,

The reasons for the changes are many and varied. Essentially, this is a cash saving move. By bringing the retirement age forwards, the government claims it can save around £74bn by 2046. Another reason is increasing longevity in the population. Back in 1948 when the state pension was first introduced, an average 65-year-old would claim their pension for 13.5 years before they died. Today, the same 65-year-old will live, on average, for 22.8 years claiming the pension.

And, would you believe it, Brexit is probably a contributing factor too. Cutting migrant workers out of the workforce is akin to shooting our economy in the foot, particularly when it comes to pensions. Young, migrant workers contribute significantly to the national income, supporting older retirees in their later years as a result.

As chair of the government’s review on aging societies, Sarah Harper, commented in the Guardian earlier this year, “if you don’t want immigrants, you’re going to have to work longer; that’s how the sums work.”

Will the changes affect you?

If you were born in the 1970’s, you’ve not been having a good time recently. No doubt you voted to remain in the EU, maybe you even casted a vote for a left-wing party in the recent general election. And now you’ve just found out you’ll have to carry on working until you’re 68.

The previous state pension age would have been 67, so we’re only talking an increase of around a year for most people. Will that really make a big difference to your retirement plans?

Essentially, most will not notice the change as acutely as they think, although the disgruntled feeling is not entirely misplaced. Research by the House of Commons library found that, of the people affected, each will lose around £9.800 in pension payments, which is not a sum to be sniffed at.

What can you do?

If you’re in your 40’s and have been affected by this change, the good news is that you still have plenty of time to adjust your retirement plans. For many people, the state pension makes up only a portion of their retirement income, with the rest coming from final salary schemes or defined benefit schemes, so by boosting the income from these, things will work out evenly in the end.

The important message to take from all this is that it’s never too early to start planning your retirement. With the new pension freedoms in place, and the time in front of you to alter your savings plans, to consider new pension schemes and to look at stocks, shares and ISAs, there’s never been a better time to enjoy a professional review. Talk to us to find out more and take control of your future, today.